Banks and other corporations purchase life insurance on employees in order to fund their employee benefit plans, and especially to fund non-qualified deferred compensation (NQDC) plans. When the insurance is purchased by a bank, it is commonly referred to as bank owned life insurance (BOLI), and when it is owned by a different type of corporation, it is sometimes referred to as corporate owned life insurance (COLI). Generally speaking, such third-party owned life insurance can be backed either by the insurance company's general account or by a separate account owned by the life insurance company. The policies backed by the general account are subject to the status and solvency of the insurance company. In other words, they are backed by the full value of the insurance company, but they are also subject to attack by the insurance company's creditors. On the other hand, policies backed by the separate account are subject to the variation of the value of the assets in a separate account, but are not subject to the credit risks of the insurance company. On occasion, owners of the BOLI or COLI policies will desire to convert their insurance from a general account policy to a separate account policy. In the past, this has only been possible through a complicated like-kind exchange procedure that also required consent by the employee being insured.
The present invention provides an improved procedure for converting third-party owned life insurance from a general account policy to a separate account policy.